Liberals do believe the market fails sometimes. This is hardly a radical position. It is almost universally accepted except among market-worshippers who seem unable to believe that anything that happens in unregulated markets could possibly be bad. So liberals believe it's sometimes worthwhile for the government to step in.

To maintain that "government fails" is equally ludicrous. Fails at what? At some things, certainly. Bureaucrats abuse their power, sometimes. So do businesses. To say simply, "government fails," is to take a rigid ideological position the only advantage of which is that it saves thinking.

"People like Samuelson like to set up a perfect world and say that the market does not bring us to this point and imply that the government should do something. They stop their analysis at that point.... My approach is to compare alternatives".

When I studied economics using Samuelson's text, it struck me that he treated government as an omniscient social welfare maximizer. Government was like a benevolent teacher that knew the answer, but only stepped in to correct the student (the private sector) when it made a mistake. Public Choice theory says that while the omniscient social welfare maximizer may be a normative model of how goverment ought to behave, it is not an accurate positive model of how government will behave.
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